How to Budget for Life After Divorce

August 05, 2014  |   Posted by :   |   Blog

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Budgeting for your divorce can be stressful, but many people fail to plan ahead to accommodate the many changes in finances that occur after separation. It’s important to work out how your living costs may change after divorce and make sure you can cover your bills, or you may be in for more stress just when you thought it was all over.

Sometimes an individual’s income will drop significantly following a divorce, while others may find they are freed up from certain debts and payments. By budgeting accordingly and organising your finances, you can help avoid scary bills or unexpected outgoings once you’re separated, and ensure that you’re receiving any extra income you’re entitled to in the form of benefits, child maintenance, or tax credits. Evaluating your financial situation post-divorce also helps you to consider settlement options, or prepare you for taking your case to court. If you’re not sure how to go about budgeting for life after divorce, here are a few points to get you started:

  • Make a list of all current income and expenses: Be thorough and account for every penny that comes in and out of your account each month. If you have bills going out at different times of the month, make a note of when your account is at its lowest and fullest so that you know exactly when you’re likely to be in the red or the black.
  • Incorporate any new expenses or income that may be applicable post-divorce: Make a realistic estimate of any new expenses such as extra childcare, child maintenance or compensating for an increase in rent. It’s also worth looking into any additional tax credits or benefits you might be eligible for after your divorce, which can really help in managing a new financial situation.
  • Note down any fluctuating income/expenses: Don’t forget about temporary or irregular costs and cash-in-hand jobs that sometimes occur – these might include luxuries like haircuts, dining out, one-off work projects, or end of year bonuses. Work out an average total and add or subtract it from your standard expenses and income.
  • Work out your disposable income: Hopefully there’s something left over after all those bills are paid! If you have a solid figure each month to use for emergencies, treats, and other random costs, you’ll find it easier to stay within your budget, or even begin to build up some new savings. If you don’t have any disposable income after your expenses are dealt with, you can start to look at where you can save money. Which brings us to our next point…
  • See where you can cut back: Everyone can save a little bit of money in one way or another. Take a long hard look at your expenses and work out where you can adjust or eliminate unnecessary costs. Switch utility providers, change to a better interest rate, reduce your nights out, ask your creditors to reduce your payment amount, switch down from branded goods to a store’s own brand – there are so many ways to save a few pounds here and there, and it will all add up over time. Websites like Money Saving Expert are a great place to start for tips on cutting back your expenses.
  • See where you can make extra cash: Do you have the time and resources to take a second job, work from home in your spare time, or start your own small business? If you’re in a secure job, look into the possibility of increasing your hours, getting a raise, or applying for a higher position in the company. Or, if you’re ready for a change in career, set your sights on a better rate and a higher income!
  • Make small changes, take small steps: When you have to make sacrifices to save money, remind yourself that your new financial situation isn’t necessarily permanent – the point of planning a budget is to help you streamline your expenses and build up a healthier bank account. And it’s much easier to make small changes here and there when you can look forward to having more financial freedom in the future. Weigh up what you want and what you need to spend money on and be honest with yourself. By taking small steps to becoming financially in control after a divorce, you’ll find yourself in a stronger position to move forward with your new life.
  • Steer clear of new debts: Be wary of taking on any new debt until you’re absolutely sure you can cover the expenses and responsibilities you already have. Divorce is a massive life change, and the temptation to make further changes is sometimes hard to resist. But before you make any big financial decisions, make sure you that your post-divorce budget can handle them.
  • Make a brand new budget: Once you have all the information above clearly laid out, you’ll be able to make a practical and productive budget for your new financial situation. Divorce can be a stressful time, but money issues will only make things worse – stay in control of your finances and create a working budget that will ease the transition into your post-divorce life.

For help getting your head around divorce, finances, and legal issues, please feel free to get in touch with us at Frances Lindsay & Co to speak to a down-to-earth, experienced family lawyer. We can help you to plan your separation realistically, with fixed-fee legal services and expert advice. Let us take the weight off your shoulders!

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